MANAGEMENT ACCOUNTING FOR DECISION

Management Accounting For Decision



Management Accounting For Decision: Part 2

Introduction

Decision making is the process of recognizing and selecting the best option among different available alternatives on the basis of the values and judgment of the decision maker. Accounting and managerial decisions impact the financial health of a company through study of costing, financial management and business activities of the organization, including manufacturing costs, overheads and cash cycles. On the other hand there are the long - term financing consisting Mortgages, Stocks, and Bonds and leasing.

The selected option should have the highest probability of success and should appropriately fits with the goals, objectives and mission of the decision maker. Effective decision making examines the uncertainty and risks about alternatives and allows choosing the best available option. Collection of information is the most important part in decision-making as it is the basis of reducing risk and making the final decision (Luthans, 2005).

Discussion

Decisions, we make them several times a day. Some decisions are effective and valid, while others appear to be a shot in the dark. Some decision leaves us with scratching our heads thinking, where did which come from. Other decisions, while we may not like them, solid decisions based in logic are better. So what separates these two concepts? The differences between these decisions are found in the decision-making process and not the decision itself.

For the decision makers, it is important to have the information for making a rational decision. For this decision making, financial planning is necessary. The requirements to be complied with financial planning for optimal results that are on the one hand, the prevention, which means company, must provide both the probable and improbable, either benefit or disadvantage to the company. Valid decisions are made on a consistent basis, when a decision making model is identified and utilized. Identifying the decision-making steps, having a working understanding of the components of each step, and the effective order of those steps, will provide a clearer path toward a sound and valid outcome to any situation. In making an individual decision, we might use the 7-steps of decision making, as defined by Rick Robert's Decision-Making Model. Those steps include: Identify the decision; Know yourself, Identify the options; Gather information and data: Evaluate options, Select one of the options, and Design a course of action to implement the decision. From a decision making perspective, diversity in the composition of the group is proposed to increase the information available for problem solving and, in turn, enhance the ability of the group to generate correct or creative solutions to problems; that is, the emphasis is on an enhanced capability for problem solving. Although never explicitly investigated, it is reasonable to presume that the effect of increasing information availability has a curvilinear effect such that some initial diversity has more value than subsequent increments; that is, there is a diminishing value to added information. The high complexity and competitiveness of markets, product changes this continuous, deep and fast in a globalized environment requires a maximum ...